Eastern European stock markets are booming, but hardly anyone is there!
– DAX with new all-time high, but Eastern European stock markets even better –
by Andreas Männicke, Managing Director of ESI East Stock Informationsdienste GmbH (www.eaststock.de) and publisher of EAST STOCK TRENDS
One third of the world’s top performers come from Eastern Europe. The Eastern European stock markets are booming, but hardly any German-speaking investors are there because the Eastern European stock markets are still treated very stepmotherly by the media and bank advisors hardly know anything about Eastern Europe. Instead, Chinese shares such as Alibaba and Tencent are recommended, which are plummeting. Yet there are good reasons why one should continue to include shares from Eastern Europe in one’s portfolio.
On 12 August, the RDX index rose to a new annual high of 1860 index points, which means a plus of 30 percent since the beginning of the year. But not only the Moscow Stock Exchange convinced again with a clear outperformance to the DAX, but 11 stock exchanges from Eastern Europe were able to clearly outperform the DAX. Andres Männicke also gives his assessment of future opportunities in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 189 at www.YouTube.com .
Eastern European stock markets far better than DAX despite new all-time high
The German stock index DAX also reached a new all-time high on Friday, 13 August (i.e. on a lucky day!) with intraday over 16,000 index points for the first time; however, many stock exchanges from Eastern Europe once again performed far better, which is hardly known. The stock exchanges from Eastern Europe are rarely discussed in the Western media, which is surprising because it is not the first time that the stock exchanges from Eastern Europe have topped the performance rankings of the world’s stock exchanges. In 2019, for example, the Moscow Stock Exchange already impressed with a price increase of almost 50 per cent. This year, the RDX index, an artificial product of the Vienna Stock Exchange for Russian shares, also achieved a plus of over 30 per cent.
Joe Biden warns of a third world war after hacker attacks
The Russian economy recovered much faster from the Corona crisis than many Western countries, but it also did not take on as much debt as many Western countries. Des is hardly mentioned in the Western media. However, political tensions with the EU and the USA remain very high. The US repeatedly blames Russia and China – often without clear evidence – for hacking attacks on the domestic economy. Joe Biden recently even warned that continued hacking attacks (from China and Russia) on a large scale could lead to a third world war. However, this warning has not yet reached the stock markets.
No new lockdown in Russia despite high number of “Corona deaths”.
Even the rapidly spreading delta variant is not causing alarm on the Moscow stock exchange at the moment, as there has not yet been a new lockdown. In Russia, vaccination readiness is always very low. Only 27 percent of the population have been “vaccinated”. There should not be a new lockdown, although the number of “Corona deaths” recently exceeded the record level of 800 daily.
Gazprom still in strong demand despite political risks
Demand for the gas giant Gazprom remains strong, also on German stock exchanges. The share price rose to a new annual high of € 6.74 last week. Last year, the share was still available at € 3.6 in April. Gazprom remains a “political issue” not only because of the controversial construction of the Northern Pipeline, but on the other hand it is also the cheapest energy stock in the world with the highest dividend yields of over 10 percent. But there are also other commodity stocks from the metals sector in Russia that are very attractively valued with also very high dividend yields in the double-digit percentage range.
Strong rouble despite falling oil prices
Although the price of crude oil, which is very important for Russia because of the high export revenues, fell sharply in August from 75 to 70 USD/barrel, the rouble remained very stable close to its high for the year of 86.2 EUR/RUB because the Russian central bank raised the interest rate by 1 per cent to 6.5 per cent due to the excessive rise in inflation. So besides price gains on the Moscow stock exchange, there were also currency gains, which was not the case last year.
Kazakhstan (+46%!) tempts with low valuations and high dividend yields
However, shares from Kazakhstan perform even better than shares in Russia. Here, too, there are a number of shares with very low valuations and very high dividend yields. The KTX index, also an artificial product of the Vienna Stock Exchange for shares from Kazakhstan, rose last week to a new high for the year of 584 index points, which means a plus of 46 percent since the beginning of the year.
Baltic countries remain the “oases of stability!
The Baltic stock exchanges from Estonia, Lithuania and Latvia are also performing well above average. Most of the countries from Eastern Europe have much lower debt levels but much higher growth rates, which makes them still look attractive, especially since valuations are very low. The fast-growing Baltic countries remain the “oases of stability” – even after the Corona crisis.
11 Stock exchanges from Eastern Europe can still outperform the DAX
A third of the world’s 30 best-performing stock exchanges once again come from Eastern Europe, with hardly any German investors benefiting for the aforementioned reasons. To be sure, with the exception of the Moscow and Warsaw stock exchanges, most Eastern European stock exchanges are relatively small and illiquid, not to mention the stock exchanges from the CIS republics or Southeastern Europe. In bull market phases, the Eastern European stock exchanges usually perform better; in bear market phases or in stock market crashes like the one in March 2020, however, they also take more of a beating, which can be hedged by cross-hedging.
A total of 11 stock exchanges from Eastern Europe are now again among the 30 best-performing stock exchanges in the world, led by Kazakhstan with +46 percent, followed by Estonia (+35.5%), Bulgaria (+34.3%), the Czech Republic (+32.8%), Ukraine (+32.7%), Russia (+25.1%), Slovenia (+25.3%), Romania (+26.8%), Bosnia (+19.1%), Hungary (+18.6%) and Lithuania (+17.9%).
Among the Central Eastern European stock exchanges, the Prague Stock Exchange performed best this time. But the Budapest Stock Exchange also outperformed the DAX. The Warsaw Stock Exchange lagged somewhat behind this year. On the Warsaw Stock Exchange, however, there are good opportunities in the growth market segment for small and mid caps “New Connect”, where, among others, the manufacturers of video games have already achieved global recognition. So there are always new opportunities on the Eastern European stock exchanges that investors can take advantage of when they hear about them.
First inform, then invest
Inform yourself now also in detail about the background and the development of the Ukraine/Russia crisis but also the future recovery potential of the undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Romania and Ukraine, with the respective stock indices all up in 2019. For example, some Ukrainian agricultural stocks have already more than doubled in price since 2016, and in 2018 the PFTS index was already up over 70 per cent again. Kazakhstan stocks were among the top performers in the world in 2017 (+56 per cent), but not in 2018 and not in 2019, but again in 2020/21.
In 2018, 10 stock markets from Eastern Europe were already among the best-performing stock markets in the world, all of which clearly outperformed the DAX and also the US stock market. In 2019, the Moscow Stock Exchange was once again the clear outperformer among all global stock markets, with a plus of over 46 percent in euro terms. But also the Bucharest Stock Exchange (Romania) already rose by over 32 percent in 2019. The stock markets in Southeast Europe and also in the Baltic countries remained very stable in the plus (Croatia +13 percent). Last year, 6 stock exchanges from Eastern Europe were among the 30 best-performing stock markets in the world and this year even 11 stock exchanges from Eastern Europe until the end of March 2021. After the Corona crash, it is still worthwhile to look beyond the horizon to Eastern Europe.
Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter.
The last EST was published on 30 July 2021, and the old EST model portfolios have already made strong gains in 2019. The “stock of the month” from September 2018 Polyus Gold already rose by over 100 per cent and the gold stock Petropavlovsk even by over 400 per cent at the high. At the end of 2018, a new “gold” sample portfolio was opened in EST, which is already up 111 per cent, and the new December 2019 portfolio of turnaround candidates rose 52 per cent. Copper producer KGHM Polska Miedz is already up almost 100 per cent since December 2019, and the December 2020 “stock of the month” TCR Group – a fast-growing fintech bank from Russia – is already up over 186 per cent in 7 months. In Kazakhstan, the new IPO Kaspi.kz, a fast-growing fintech company from Kazakhstan, which was extensively featured in EST in April, is making a splash. The stock has already risen 40 per cent since then. The “Stock of the Month” from January 2021, the iron ore companies Ferrexpo and Black Iron from Ukraine could already increase by 30 to 80 percent since the beginning of the year So there are always new opportunities on the Eastern stock markets! The motto therefore remains: Go East!
Interview notes: The last TV interview on NTV/Telebörse was on 15 April 2021 together with Andreas Männicke and Kemal Bagci from BNP Paribas and the last radio interview was on 2.8.21 on Börsen Radio Networks. The next interview will be on 19.10.21 at 11.00 am on Börsen Radio Networks. You can download the interviews now at www.eaststock.de, there under the heading “Interviews”, as well as the EastStockTV video of the same name, episode 189. By the way: have you already subscribed to the EastStockTV YouTube channel?